Export Wage Premiums In China’s Manufacturing Firms

Since China’s reform and opening-up, it has implemented export-oriented policy and made economic growth miracle. China has fully taken advantages of cheap labor forces and actively participated in global industrial chain, thus achieving great prosperity of export trade. In the meanwhile, we can also witness rapid increase in workers’ wage level. The positive correlation between export and wage does not necessarily mean that export trade has played a positive role in promoting wages. This paper focused on the impact of exports on labor remuneration both theoretically and empirically.Based on the related theories, the paper discusses several conduction mechanisms about how international trade affects wages. The main possible pathways include:commodity price effect, productivity and technology effect, and enterprise behavior effect. Export wage premium is the result of multiple mechanisms.The empirical research is on the basis of 2993 manufacturing firms’ panel data during 1998 to 2007. Firstly we set a basic model and use fixed effects regression method to test the existence of export wage premium, and here’re the core conclusions:1) The basic model focuses on the question:whether the manufacturing enterprises in different export status have significant different wage levels. Both descriptive statistics and econometric analysis indicate that, wages of exporting firms are higher than those of non-exporting, i.e. there’s a significant export wage premium. Using export intensity as an alternative variable and removing the maximum and minimum extreme samples, the conclusion become more robust.2) Then the enterprises are classified by ownership, industry and region, and are analyzed in group. It’s found that firms of different types achieve different export wage premium. HMT and foreign-invested enterprises, low-tech product manufacturing firms, and companies in eastern region can enjoy most significant wage premium.In addition, built on the basic model, the paper makes further research in three contexts and reveals that:3) There is no significant difference in wage growth rate between export and non-export firms, i.e. wage growth premium does not exist.4) Taking account of the heterogeneity of enterprise employees, export wage premium is still very significant. However, exporting enterprises employ less skilled human capital, which is in contradiction to the theoretical analysis.5) Exporting enterprises with different export history have distinct different wage premium. Always-exporters gain highest premium, prove the existence of export-learning effect, especially in the long term; entrants’ wage level is higher than never exporters’, even before entering the export market, indicating that high-wage firms tend to choose exporting. In conclusion, the export wage premium results from both export-learning and self-selection effect.According to the empirical research, it can be concluded that basically traditional international trade theories apply to China. Export trade improves enterprises’ wages significantly. Meanwhile, China’s export wage premium has distinct Chinese characteristics. The paper argues that the government should make more efforts in deepening reform & opening up, enhancing enterprises’ competitiveness, and improving labor market’s effectiveness.